As Iraq moves ahead with plans to gain assistance from the private sector in delivering its ambitious power generation programme, a lack of gas feedstock to supply the new plants is becoming a key concern.

Iraq’s Electricity Ministry has begun negotiations with four developers for the country’s first independent power projects (IPPs), in addition to an ambitious engineering, procurement and construction (EPC) power generation programme, to assist in its efforts to meet the supply-demand mismatch. In 2013, the available power of 11,025MW could only meet 67 per cent of the 16,574MW peak demand.

However, while progress with IPP and EPC power generation projects is encouraging, securing gas feedstock to fire the new plants is becoming increasingly important.

Biggest challenge

Speaking on the sidelines of MEED’s Iraq Energy Projects conference held in Dubai on 26 February, Karim Aftan al-Jumaili, Iraq’s electricity minister, told MEED the availability of gas would be the biggest challenge in implementing the country’s power plans.

Despite having the fourth-largest reserves of conventional oil in the world, Iraq’s power sector, like much of the country’s infrastructure, is in urgent need of development. More than two decades of war, sanctions and under-investment have resulted in significant damage to plants and transmission and distribution networks.

“The Saddam Hussein regime neglected important investment in the power sector, and the gap between supply and demand got bigger following the US invasion in 2003,” says an international contractor involved in Iraq’s power generation programme.

According to the Special Inspector General for Iraq Reconstruction (Sigir), the US spent $5bn on Iraq’s power sector between 2003 and 2012, but to little effect.

“After 2003, with the change, there was an import of materials and equipment,” Laith Hamid, general manager of planning and studies at the Electricity Ministry, told delegates at the conference. “It improved the situation, but there was a gap between demand and supply.”

By 2009, as peak demand rose to 13,000MW, electricity was only available for eight hours a day in most areas of Iraq. While the country has done well to increase available capacity to 11,025MW by mid-2013, peak demand has continued to rise, reaching more than 16,500MW by November last year. In addition to affecting the living standards of Iraqis, the power shortages are having a severe impact on the country’s development, with the total cost to the economy estimated at more than $40bn a year.

In order to meet existing and future demand, the Electricity Ministry is planning to install an additional 31,685MW of generation capacity by 2020. Since 2007, the authority has awarded contracts for 27 new power plants, with a total combined capacity of 17,866MW. But there is still a lot more to do. Between 2014 and 2020, the ministry says it will tender 5,990MW of IPPs, 4,050MW of traditional EPC projects and 400MW of renewables schemes. The authority will also convert 5,612MW of existing simple-cycle turbine plants into combined-cycle gas facilities.

About 19,705MW of the additional capacity planned to come online by 2020 will require gas as feedstock, a significant jump from the 4,811MW of power currently generated from gas. The switch in feedstock forms a key part of the ministry’s Electricity Masterplan, which was completed by US consultant Parsons Brinckerhoff in 2010. The plan forecasts a total investment of $75bn in the power sector between 2012 and 2030. One of the targets it sets out is for combined-cycle gas turbines to become the primary technology for power generation after 2016, for economic and environmental reasons. This goal has been reaffirmed in Iraq’s Integrated National Energy Strategy (INES), which was unveiled in June 2013 and outlines a $620bn investment plan for the energy and power sectors.

Before the launch of the Electricity Master-plan in 2009, Iraq’s power plants were heavily reliant on liquid comprising crude oil, heavy fuel oil and gas oil. These accounted for 87 per cent of the fuel used in power generation. The remaining 13 per cent was covered by natural gas. By 2013, the percentage of power from natural gas had risen to 31 per cent, but was still well short of the 83 per cent of power that the government plans to draw from plants using gas turbines by 2030.

Idle plants

While the ministry’s efforts to use the most efficient technologies have been welcomed, securing gas to fire its future power plants will be a stern challenge. “Getting gas for the facilities is a vital issue; without it, you will have plants sitting idle,” said Jafar Jafar, CEO of Dubai-based Uruk Engineering & Contracting Company, at the MEED conference.

Uruk Engineering is only too aware of the impact of gas shortages on Iraq’s power market. To date, the firm has built 1,500MW of capacity at three different plants across the country. Jafar highlighted one of the power schemes the company has worked on as an example of the struggle Iraq faces to meet feedstock requirements of new plants. In partnership with France’s Alstom, Uruk Engineering completed the construction of the 730MW Mansuriya power plant in December last year. However, the facility cannot be commissioned until it has secured a supply of gas and there is no sign of this happening any time soon.

“We have done our part, but the plant cannot start until there is gas,” said Jafar.

The completion of the power plant is in stark contrast to progress with the development of the nearby Mansuriya gas field, which is planned to supply fuel for the facility. A contract to develop the field was awarded in October 2010 and approved in Iraq’s development plan in June 2011. The field already has four wells drilled and had an initial target of supplying 100 million cubic feet a day (cf/d) of gas by December 2013, which would have been sufficient to run two units in the newly constructed power plant. However, by the end of 2013, there was no visible evidence that any major work had started, said Jafar.

Iran imports

Until domestic reserves are available, Iraq will be required to step up imports from Iran. As part of plans to increase imports, in July 2013 Iraq signed a bilateral deal for gas deliveries through a cross-border pipeline from the Islamic Republic, amounting to 850 million cf/d of gas. In December, it was reported that Baghdad and Tehran were close to signing an additional gas import deal.

However, even supplying power schemes with imports has become difficult due to a number of security breaches in the Iraqi province of Diyala in recent months, with one violent attack targeting workers building a pipeline to transport gas from Iran to the Mansuriya plant. The attack, in December 2013, resulted in the death of 18 engineers working on the pipeline, including 15 Iranians and two Iraqis.

Basra project

Iraq is making progress with some major gas schemes to provide supplies for power generation, including the $17bn Basra gas project that is being executed in partnership with the UK/Dutch Shell Group. While the process of capturing gas at the scheme has begun, the rehabilitation of processing plants and pipelines will be required before adequate supplies can be directed to power plants throughout the country.

Baghdad faces several financing, contracting and logistical hurdles that will need to be overcome if it is to meet the current electricity demand and ensure there is enough capacity to prevent power shortages by 2020. However, if the country is to meet its development targets, securing adequate gas supplies either through imports or domestic production is set to provide the toughest challenge and must remain a key priority.

Key fact

In 2013, Iraq’s available capacity was 11,025MW, while peak demand was 16,574MW

Source: MEED